Explanation of a Loan
A person or body that provides another with a sum of money (loan) is called the creditor and the person borrowing the sum is called the debtor; once the terms have been agreed, a legal contract will need to be signed. The true definition would include, services, products or people (like staff) but for the purposes of this piece it is financial arrangements we are concerned with. Loans are required to be paid back and this is normally within a period set at the commencement of the contract; normally repaid in regular amounts, which can be on a monthly, but sometimes three monthly basis.
When debts are repaid a charge is added to the sum owed called 'interest' which is how the lender can gain from the service he has provided. Some companies add the interest onto the repayments but make sure this is the first part to be paid so a number of monthly payments might be required before the capital repayment actually starts to be paid. More frequently the amount is repaid in equal installments, a portion of which is the interest.
Whilst financial establishments can play many roles, this is the most frequent way in which they are used. For both companies and individuals, arranging a loan is a way to increase their cash flow for a regular monthly outlay. whilst other ways to raise capital can be used, this is often the quickest method.
Arranging a mortgage, whilst a little more complicated, is in essence the same but the use for which it is required is not flexible and the money can never be used for anything other than buying a house or land. The financial institution is given security however; in this case the title to the house, until the mortgage is paid off in full. Defaulting on a loan like this could mean that the bank or other lender could repossess the house and then re-sell it; whilst they can reclaim money owed immediately this way, they may also decide to retain the property until a later date.
In some instances, a loan taken out to purchase a new or used car may be secured on the car itself; in much the same way as a mortgage is secured by the house itself. Car loans are generally much shorter as the useful life of a car is correspondingly reduced; usually lasting no more than 5 years, maximum.
Unsecured loans are available from financial institutions under many different guises or marketing packages; if you have an overdraft or credit cards for example, this is exactly what these arrangements are. Every bank and other financial institution has different methods to calculate the interest they charge on unsecured credit but a good rule of thumb is that store cards will be the highest followed by credit cards.
Financial companies can be caught out too when they provide cash to a person so they can gain advantage over his or her situation; also known as predatory lending. This is an area where credit card companies in some countries are also criticized as they supply cards at very high rates of interest and add on other spurious charges to the holder. Always remember to look carefully at the small print of any financial agreement you are about to sign.
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HSBC May Buy Back London Headquarters - Wall Street Journal
Telegraph.co.uk HSBC May Buy Back London Headquarters Wall Street Journal - The loan matured Thursday, but cash-strapped and heavily indebted Metrovacesa is having trouble raising new financing, making a sale back to HSBC a likely ... UPDATE 3-Metrovacesa to offer HSBC HQ to bank for $1.3 bln Metrovacesa to Offer Tower to HSBC for $1.3 Billion (Update2) Metrovacesa looks to sell HSBC's HQ back to HSBC -